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A Citizens' Guide to Energy Subsidies in Malaysia

Transport fuel has been subsidized in Malaysia since 1983 and now accounts for more than 43 per cent of the country's gross development expenditure. In contrast, the Ministry of Health and Ministry of Education accounted for just 3 per cent and 13 per cent respectively.

Subsidies are intended to keep energy affordable for its citizens. Subsidies do this directly, by enabling consumers to pay less for fuel, and indirectly, by making the goods and services that use subsidized fuel (such as public transport) cheaper by reducing input costs. Yet there are also both direct and indirect costs associated with subsidies that are not always obvious, such as increasing national debt, worsening pollution, and widening socioeconomic gaps.

This guide gathers the best available information on the costs and benefits of energy subsidies. The first part of the guide gives an overview of various types of subsidized energy in Malaysia. The second analyzes the impact of these subsidies on the citizens of Malaysia and the country’s economic development. The final section discusses energy subsidy reform, drawing lessons from international experience.